Rogue Marijuana Dispensaries Cause Conflict With Legit Pot Shops

Donnie Anderson says it took weeks of driving to count the pot dispensaries in City Council District 8, which covers much of South Central Los Angeles. The team found two shops granted “limited immunity” by the city, but they were vastly outnumbered by 133 of what Anderson calls “rogue shops.”

As partial owner of Med X, one of the two dispensaries in the district that are trying to follow the rules, it bothers Anderson that scores of other less conscientious stores operate openly, selling similar inventory, while not necessarily paying taxes or fulfilling other obligations of legitimate businesses. A former music and entertainment executive, he’s a founder of the Southern California Coalition, an advocacy group that created Measure M, as well as chairman of the NAACP’s cannabis task force for California and Hawaii.

District 8 is overwhelmingly Black and Latino. But Anderson says many of the rogue shops are owned by non-residents who are, in effect, siphoning money out of the area. “They don’t live in the community, they don’t invest in the community, they just know that our people are going to purchase cannabis,” he said.

L.A. is the world’s largest cannabis market, but it lacks organization. After California voters first legalized medical marijuana in 1996, Sacramento left it to local governments to govern the industry. While cities like San Francisco and Oakland have licensed some businesses, L.A. has been slower out of the gate. In 2013, Proposition D granted limited immunity to 135 L.A. dispensaries, but did not allow them to apply for full licensure. Those stores don't meet customer demand and so several times as many unrecognized shops and delivery services continue to operate. Plus, Proposition D doesn’t offer any protections to the growers, edible makers and other kinds of cannabis businesses.

The result is a market where businesses are either disincentivized, or have no available route, to operate "above ground."

Anderson, believes this will change with Measure M, which L.A. voters approved in March. The measure gives City Council authority to regulate all kinds of cannabis operations in the city — not just shops — to create legitimate taxpaying businesses.

On major thoroughfares in District 8, the green crosses signaling rogue dispensaries appear on virtually every block. Though many of them lack Med X’s bright, clean reception area, they are selling essentially the same variety of products. (Workers at several of these shops declined to speak with L.A. Weekly)

“It’s hard to know who owns any of these things,” District 8 Councilman Marqueece Harris-Dawson told L.A. Weekly. “So many of these shops are fly by night.”

Supporters believe Measure M will bring L.A.'s unorganized market under city control. In addition to distributing licenses, it allows the city to fine non-compliant businesses $20,000 per day. “No dispensary is making the kind of money that can survive that,” Anderson said. It also allows the city to cut off the utilities at non-compliant businesses. The idea is to squeeze out the bad actors, while using licenses to create a legitimate market.

Both Anderson and Harris-Dawson expect this transition sometime around January 1, when state regulations for the industry are also expected to take effect. City Council has not yet released its proposed regulations, which will then be followed by a comment period.

While a great deal of optimism surrounds Measure M, it also creates fissures in the cannabis world. Growers, shops, testing labs, extractors and other kinds of businesses all shared the common goal of getting licensed, their priorities are likely to diverge.

At a recent event hosted by the Southern California Coalition, entrepreneurs voiced their concerns. A cluster of a few dozen edible and extract makers said competition for space in stores was already brutal, and if the non-compliant dispensaries closed, they would at least temporarily have far fewer places to sell their products. A middle-aged white man who identified himself as an edibles maker told the group: “We’re all selling to anyone we can sell to because we’re all in survival mode.”

Bonita “Bo” Money

Danny Liao

Bonita “Bo” Money, founder of Women Abuv Ground, a cannabis networking organization for women of color, said in a phone interview that the competition is unforgiving, especially for the larger companies “trying to make a dent in the industry.”

In general, Anderson is not sympathetic. Companies “had six years for [a] product to be successful,” he said, urging them to “sit back until we get this [regulation] right.” It’s unlikely to be easy. In addition to jostling between growers, shops, manufacturers and other factions, Measure M gives the City Council authority to address “Historical issues of social equity and social justice related to the commercialization of cannabis.”

With Measure M, the council has a mandate to bring Black and Latino communities, which have been disproportionately targeted by harsh drug laws, into this promising new legal industry.

Many jurisdictions, notably Oakland, share similar goals but have stumbled in efforts to make them a reality.

L.A. now has a chance to be an example for other cities, but it will have to answer complex questions addressing sources of capital — a longstanding barrier for minority entrepreneurs — and what roles previously convicted felons can have in the industry.